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September 24, 2013

More Women Step Up as Family CFO, but Gap Remains

Fidelity study finds young women highly deferential to male partners

Women are increasingly engaging in the family finances beyond simply budgeting, but many still lack confidence when it comes to investing and routinely defer to their partners on important financial decisions, according to a report released Tuesday by Fidelity Investments.

Fidelity's 2013 Couples Retirement Study analyzed retirement and financial expectations and preparedness among 808 couples who were at least 25 years old, married or in a long-term committed relationship and living with their respective partner, and had a minimum household income of $75,000 or at least $100,000 in investable assets.

The new study found that the number of women claiming primary responsibility for day-to-day financial decisions had jumped to 24%, up from 15% in 2011, and those claiming primary status for long-term retirement decisions more than doubled to 19% from 9% in 2011.

While 92% of couples agreed they communicated well and 81% described themselves as “one financial entity,” many women were more confident in their partners’ ability than their own in taking full financial responsibility of retirement decisions from a spouse if necessary.

Fifty-three percent of men were very confident in their own ability versus 45% of women, and 52% of women, in turn, were confident their “other half” could assume this role, versus 43% of men.

In an unexpected finding, younger women tended to be the most deferential of all, the report said.

These findings were echoed in other recent research that showed significant numbers of affluent women lacked confidence in their investment abilities.

“While a lot of progress has been made, it’s critical for women to empower themselves by becoming equal partners managing the family finances and in long-term financial planning conversations,” Kathleen Murphy, president of Personal Investing at Fidelity, said in a statement.

This is particularly the case given that the average woman can expect to outlive her male companion by almost five years, Murphy said.

The study explored why women aren’t as engaged as they should be about finances. It suggested women may lack confidence, for example, perceiving men as “better with numbers.”

Other factors, it said, might include that couples divided household tasks based upon perceived strengths or interests, or perhaps repeated behaviors and habits they had observed in their own parents.

At the same, research showed that women were often more disciplined investors and tended to stay the course once a financial plan had been crafted. They also tended to be more consistent, conservative and risk-averse investors.

For example, only 4% of the women in this year’s survey were willing to invest a substantial portion of money to achieve potentially higher returns, even if this risked losing some or all of initial investment, versus 15% of men.

The 2013 study expanded to examine the behaviors of Gen X (born 1967–1978) and Gen Y (born 1979–1988) couples. Even though more than three-quarters of younger women were working, they appeared to be playing a more passive role than older women.

While 24% of boomer women (born 1946–66) identified themselves as the primary decision maker for day-to-day financial decisions, only 12% of Gen Y women did so.

Moreover, only 45% of Gen Y women said they were a joint decision maker when in retirement savings decisions, compared with 58% of Boomer and Gen X women.

In its statement, Fidelity recommended that couples consider the “three Cs” to help them engage and align on a financial plan:

Communicate: Set aside time to have meaningful conversations and identify shared financial goals, engaging a financial professional if extra help or guidance is required

Collaborate on a plan: This gives each partner an equal opportunity to understand their financial needs and how to get there, and helps identify potential hurdles and sacrifices

Control leads to greater confidence: Having a plan and sticking to it, with yearly reviews, leads to greater confidence for both partners.